Debt Crisis: as it happened - December 6, 2012

The Italian government is on the brink of collapse after Silvio Berlusconi's
PDL party withdrew its support from unelected prime minister Mario Monti.
President Giorgio Napolitano is has said says he wants to avoid a turbulent
end to the government and that he will evaluate the situation in the next
few hours.

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17.12 That's where we leave our live coverage for today. We'll be back tomorrow morning to pick up where we left off. Until then, keep an eye on our finance page for all the latest business and economic news.

17.08 European stocks rose to an 18 month high today amid investor optimism after 80 members of the US Congress, both Democrat and Republican, signed a letter urging for "all options" to be explored to end the deadlock over a budget deal.

The FTSE 100 climbed 0.16pc, the CAC advanced 0.31pc, the DAX grew 1.07pc and the IBEX went up 0.35pc.

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16.37 Bad news for Italy could mean good news for Britain, though. UK government 10-year bond yields fell five basis points this afternoon, thought to be caused by an investor flight to a safe haven. Elisabeth Afseth, an analyst at Investec Bank said:

The market is obviously not too concerned about any rating implications of yesterday’s statement. Italy could become quite nasty.

16.23 The Italian president Giorgio Napolitano says he wants to avoid a turbulent end to the government and that he will evaluate the situation in the next few hours. Silvio Berlusconi's centre-right PDL party abstained from a vote of confidence on prime minister Mario Monti's economic measures in the upper and lower houses today. Italian bond yields have risen the most in four months amid fears the government is on the brink of collapse.

Italian president Giorgio Napolitano

15.57 Canada's central bank, led by the future Bank of England Governor Mark Carney, said the eurozone debt crisis continues to pose a "very high" risk to the North American nation's financial system. Officials said in a statement:

The risks from a re-intensification of the crisis in the euro area remain very high.

15.40 Tension is mounting in Italy as the centre-right PDL party said it will abstain in a confidence vote on Mario Monti'seconomic package in the lower house this afternoon after staging a walkout in the upper house this morning. Earlier (14.34) I wrote such a move might lead to the collapse of government and the president calling an early election.

15.29 Some insightful comments from sovereign risk expert DrNicholas Spiro. He described a "tale of two halves" in the eurozone where a deteriorating economic outlook sits alongside markedly improved conditions in financial markets.

The fact that Mr Draghi all but admitted that a cut in interest rates was considered at this month's policy meeting shows just how dire economic conditions in the single currency area have become.

To a large extent, the ECB has done its bit and has passed the baton to eurozone politicians who continue to drag their feet on the big issues of the crisis - in particular moves towards a banking union.

That there was more interest in Italian bond yields than in Mr Draghi's comments says much about the current predicament of the eurozone: politics has become the main focal point for market anxiety.

15.20 The £7bn black hole in Britain's budget will need to be filled by new taxes after the next election, the Institute for Fiscal Studies said this afternoon at their Autumn Statement analysis. IFS director Paul Johnson said one protected area that may be raided to plug the gap is spending on benefits for pensioners such as free television licences and bus passes. He also said adding a penny to the basic rate of income tax would help raise funds.

15.08 The US stock markets opened to mixed market sentiment as traders await news on a political deal as the fiscal cliff approaches.

The Dow Jones Industrial Average went up 0.04pc, while the S&P 500 slipped 0.03pc and the Nasdaq dropped 0.13pc.

15.00 EU president Herman Van Rompuy has called for greater economic and policy centralisation in the eurozone to strengthen the euro, in a paper prepared for next week's leaders summit. In what sounds like a move that would erode the sovereignty of individual member states, he said:

The provisions for democratic legitimacy and accountability should ensure that the common interest of the union is duly taken into account; yet national parliaments are not in the best position to take it into account fully.

This implies that further integration of policy making and a greater pooling of competences at the European level should first and foremost be accompanied with a commensurate involvement of the European Parliament.

14.34 The centre-left Democratic Party (PD) in Italy said parliament should be dissolved if Berlusconi's centre-right party stages a second walk out as they did earlier today (11.50) as it would show a lack of confidence in the unelected technocrat leader Mario Monti, who was appointed last year to tackle the state of the country's economy.

14.12 Draghi admitted the ECB's decision to leave interest rates unchanged was not unanimous. He said:

There was a wide discussion, but in the end the prevailing consensus was to leave the rates unchanged.

14.08 Another question to Draghi on the single supervisory mechanism on what kind of agreement will be reached. He admitted that although one should aim for a single supervisor for all 6,000 euro-area banks, that in practice it wouldn't make a big difference if only the largest banks came under the mechanism.

13.56 Mario Draghi, President of the European Central Bank, has been asked whether he thinks the Single Supervisory Mechanism will face delays after eurozone states failed to reach an agreement on Tuesday. He said:

The political discussion has really just started, but I'm very confident we'll soon reach an agreement. The benefits of having a single supervisor are not disputed, it aims to break the link between the sovereigns and the banks to make banks reliable and trustworthy.

13.49 The European Central Bank has revised its eurozone GDP growth projection downwards, saying it is likely to contract in 2013 and grow 1.2pc in 2014.

13.01 The European Central Bank has held interest rates at 0.75pc, in line with most economists predictions. It appears to be waiting

12.31 Even in the worst depths of financial crisis, citizenship is not something which can be bought or sold, according to Bulgarian prime minister Rosen Plevneliev who today threw out parts of a new law which would grant citizenship to anyone investing one million leva (£400,000) in the country. He said:

This approach does not take into account the essence of citizenship as a political and legal tie of the person with the state from which ensue a series of rights and obligations.

12.13 Bank of England officials, unmoved by the revised OBR forecasts yesterday, unleashed no surprises by voting to hold interest rates at 0.5pc and maintain their quantitative easing target of £375bn, as most economists expected. The European Central Bank's monetary policy decision is still to come later this afternoon.

12.03 In a sign that Germany's loss of France as an economic ally will see it turn to Britain for solidarity, German MP and budget spokesman Otto Fricke, speaking at an Open Europe event, said Germany "wants to be part of a European leadership, but we don't want to be the European leader", and therefore needed support from countries like Britain, because "we don't have France to lean on."

11.50 Pre-election tension in Italy reached a pitch today when ex-PM Silvio Berlusconi's PDL (People of Freedom) party walked out ahead of a vote of confidence on Mario Monti's economic measures. Despite the abstention of the PDL, the largest party in parliament, Monti's plans were approved in the Italian Senate. Yesterday Berlusconi hinted he might go back on previous pledgesand run for a fifth term as prime minister in the election, which is expected in March.

Silvio Berlusconi

11.31 Britain's widening trade deficit, which grew more than expected in October to £3.6bn, is stoking fears of a triple-dip recession. Read our economics editor's report here.

11.15 Some good news from the eurozone: Germany's manufacturing sectorsaw demand surge almost four times as much as economists forecast in October. Factory orders jumped 3.9pc between September and October, driven by 8.5pc increase in demand from outside the euro area.

10.45 But there's still no getting away from Greece's economic woes for Mr Samaras. His comments came on the same morning as the latest bleak unemployment figures. The unemployment rate in September stood at 26pc, up from 25.3pc in August and compared to 18.9pc in September 2011.

10.37 The Greek Prime Minister Antonis Samaras told a German newspaper it is unlikely the country will need a further debt "haircut", saying its debts are now on a more sustainable footing and it is tackling tax evasion problems. In an interview in Bild published today, he said:

We're doing everything to emerge quickly and safely from the crisis. No one is more interested in leaving all this behind them than the Greeks themselves.

The Greek Prime Minister, Antonis Samaras

10.25 Latest EU GDP figures have confirmed fears the eurozone is in recession for the second time in four years. GDP in the 17-nation currency bloc fell 0.1pc in the third quarter after falling 0.2pc in the previous three months.

The EU as a whole fared slightly better, with GDP across all 27 nations edging up 0.1pc after contracting 0.2pc in the second quarter.

10.03Car sales revved up this year, fuelling hopes of a return to 2008 levels by the end of the year. The nearly 2m automobiles sold in Britain this year make the UK car market bigger than those in France and Germany.

09.41 To Europe now, and the latest French unemployment figures may vindicate Osborne's insistence things aren't so bad in Britain. Joblessness across the Channel has crept up to 10.3pc, the highest rate since 1999. Youth unemployment edged up to 24.9pc.

09.08 Over at the UN climate talks in Doha, the EU bloc refused to commit to new climate funding for 2013-2020 in the face of fresh pleas from nations most at risk from global warming, citing its tight finances. Individual EU nations did make some pledges though, including the UK which agreed to give £2bn over the next two years.

The FTSE 100 is up 0.02pc, the CAC has risen 0.79pc and the DAX is up 0.19pc.

08.49 The chancellor's been busy this morning. He is currently on Sky News where he defended the protected 0.7pc aid budget, saying British compassion is a hallmark of the country. He was also on BBC News earlier saying credit rating was important but not the only measure affecting borrowing rates, after Fitch Ratings said Britain's AAA rating could be at risk (06.31). He said:

It wouldn't be a good thing but the credit rating is one of a number of ways in which people look at countries. Because when people look around the world and they look at countries to invest in they think Britain is a good investment.

08.39 George Osborne has just been on the Today Programme where he refused to say whether borrowing would still be down if the 4G spectrum sale had not been included in the accounts.

He called the story "a desperate attempt" by the Labour party to explain why they were wrong about the deficit going up. He also took a swipe at the shadow chancellor:

The reason the Commons doesn't take Ed Balls very seriously is because he was the chief economic adviser when it all went wrong. He never admits he was at the scene of the crime.

07.55 Shadow chancellor Ed Balls has just been on the Today Programme after his embarrassing performance in the Commons yesterday (he said the deficit was not rising). He pointed out borrowing only went down because of Osborne's "sleight of hand" by slipping in the £3.5bn raised from the 4G spectrum sale this year into the government accounts and said it was "impossible to know what was going on" as he had been given no figures or documents. Blaming his stammer, he said:

Everyody knows that I have a stammer and sometimes it gets the better of me when I speak, especially when I have the Prime Minister, the Chancellor and 200 Conservative MPs shouting at me.

That's who I am and I don't mind that. I just want to win the arguments about what's right for Britain and our economy.

Ed Balls giving his response to the Autumn Statement yesterday

07.26 The only group to emerge better off after the Autumn Statement are basic rate taxpayers not on welfare, says Institute for Fiscal Studies director Paul Johnson, speaking on the Today programme. The IFS will be presenting their analysis of yesterday's mini-budget later today. He says:

Those at the top have actually lost a fair chunk, and those of working age depending on benefits are also losing a chunk.

But basic rate taxpayers who are not on welfare, they actually gained a bit.

Paul Johnson

06.45 Time for a look at this morning's front pages. Predictably, the Autumn Statement features heavily. The Daily Telegraph has gone with "Long, hard road to recovery", while the Guardian says "At least someone's laughing..." above a picture of George Osborne chuckling (this was the moment that Ed Balls fluffed his lines and said that the deficit wasn't rising).

The most gruesome page is definitely The Independent's, which has the headline "Osborne runs out of tricks" with a cartoon of the Chancellor pulling a rabbit skeleton out of a top hat. The Times has also run a cartoon of Osborne on its front page, with a fuel-duty themed image that points out Osborne has missed his targets by some margin.

06.31 Rating agency Fitch has warned overnight that the UK's AAA credit rating could be at risk, as George Osborne has failed to hit his deficit reduction targets. The failure "weakens the credibility" of the rating, it said.

06.29 Yesterday George Osborne unveiled his Autumn Statement. We've compiled a summary of the key points for you, but if you're really pressed for time, here's a summary of that summary:

• Threshold for 40% tax rate to rise by 1% in 2014 and 2015

• Planned 3p per litre rise in fuel duty scrapped

• No new tax on property

• SME equity markets to be held directly in stocks and shares ISAs

• Corporation tax to be cut by 1% to 21% from April 2014

• OBR forecasts 0.1pc contraction this year

• OBR: economy will grow 1.2pc next year, 2pc in 2014

06.00 Good morning and welcome to our live coverage of the eurozone debt crisis.